Security & Fraud

KYB’s Coming Of Digital Age

KYB’s Coming Of Digital Age

Sometimes the most interesting thing that comes from trying to solve a problem isn’t the eventual solution, but the other problems that are found along the way. Case in point: Cognito’s forthcoming business verification product, according to CEO Alain Meier. Their original solution, he explained to PYMNTS in a recent conversation, was an identification product for individual consumers. But while building that product and sending it to the market, they realized there was a beckoning opportunity in the world of business identification.

There are all kinds of points in an individual authentication process where information about a business and its standing are relevant. What the Cognito team learned, however, was that it’s not always easy to gain access to that kind of data. Finding all the information necessary to verify a business meant looking at a host of sources and expending large swaths of time.

“We learned that the business verification world is less developed than its consumer counterpart. The individual identification world has dozens of well-funded competitors building solutions. The business verification space is much more limited,” Meier said, noting that the existing options are not all that well-developed, fast or reliable.

For Cognito, it seemed to be a good time to start building for that hole in the market – and to create an automated system that could provide a level of service comparable to what individual consumers are used to seeing in today’s market.

Because workers and business owners are also consumers, Meier noted, they know what a good experience looks like in part of their lives – and they aren’t willing to accept a bad experience in another part.

Streamlining an Arduous Process 

In most of the contemporary business verification world, the current process, according to Meier, is slow, labor-intensive and fundamentally manual. Verifying a business’ identity often entails a worker spending many hours juggling numerous open tabs and correlating information. And more than time-consuming, it’s also often inaccurate.

“Something we have seen among compliance teams is that people are very fallible,” Meier pointed out. “No matter what level of compliance procedure or protocol you put in place, people will make mistakes. There is always so much room for individual error when people are going through those same 20 procedures to onboard multiple businesses a day.”

The first goal in building business verification, he noted, is to use automation to elevate the procedure so that human intervention is only needed at the end, to look at a single set of relevant data and concerns flagged by the algorithm’s background scanning of variables.

That means doing some rethinking about what kind of data to focus on. According to Meier, many of the data sets floating around in this arena need a sharper focus on the types of identifiers businesses tend to collect in 2019. Information like EIN, legal name or incorporation data tend to dominate, although they have become less important than things like the business’ name and URL.

“We think it makes sense to start with the core of what people are actually using to reference a business nowadays,” Meier said. “Using that as a backbone, it becomes easier to collect all kinds of information that might be important, like incorporation filings, LinkedIn data and social media threads.”

Combining a more centered and robust data set with a process streamlined by automation, Meier said, results in the ability to offer business verification that is faster, more accurate and more invisible to the business that is being verified.

The Evolving Marketplace

The goal isn’t to automate human beings out of the compliance process, Meier stated, but to put them to better use in the system, so their input is more useful to the process. What business verification can do best for its corporate clients, he said, is to detect red flags and raise an alarm. And if red flags are not found, that means there is reasonable certainty that a good client can be passed through without expending additional resources.

“Our goal is to speed up this process for the good guys so it is more efficient for everyone involved, and only fall back on more standard procedures when alarms have been raised that more direct scrutiny is needed,” Meier explained.

As businesses push online and digitize more of their services, they are running into the same issues encountered by those in the individual identity business five to 10 years ago. And to their credit, Meier noted, the industry recognizes the gap in services and the need to catch up to their consumer-serving counterparts.

Which means the time is now to start building those better verification solutions –because, as Meier pointed out, the consumer market has already laid out a pretty clear roadmap of how this will go. When better experiences become available, they quickly become the expectation in the marketplace. And those that fail to provide them don’t tend to stay in the market.

“Everyone is interested in increasing automation,” he said. “If you don’t have the most automated solutions, businesses will go somewhere else to access faster onboarding or better services.”

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The September 2019 AML/KYC Tracker Report provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

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